The US economy is hard to recover in the 'V' shape, but stocks are different
According to economists, the US economy is difficult to recover in the 'V' shape, but that does not too affect the recovery of the stock market.
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It can be seen that, due to the influence of Covid-19, in March, the US production and business activities were interrupted, the number of jobs decreased had negative effects on small businesses and consumers. The production of this group is very small. Most Americans are using loans to spend money, go to college ... so this group is facing more difficulties when income is suspended, while fixed costs still have to be paid.
The US economic scenarios are expected by economists to recover in the form of "V", "U", "L" or the "Nike" symbol.
"I think a V recovery is possible, but I am worried that the outcome will be somewhat worse and it really depends on the level of losses during the time the economy is closed. tape as it is now, "Former Fed Chair Janet Yellen told CNBC on Monday (April 6).
According to analysts, if the social easing is done after gradually controlling the epidemic, production and business activities will gradually recover. However, it is difficult to measure and predict the recovery of how long and how long, as well as solve all the consequences that Covid-19 left to return to production and business activities before the outbreak. difficult because there is no measure to expect and also depends on confidence in society. Therefore, forecasting is even more difficult.
However, there are a number of sectors in the economy that can be easily predicted for vulnerability such as the shipping industry, traditional retail and small businesses that are difficult to recover quickly.
The chief economist at PNC Financial said that the longer the epidemic in the US, the greater the damage will be to the world's largest economy and the recovery will weaken. Small businesses will suffer the most and are less likely to resume operations.
He expects that, after being negatively affected in the second quarter, the US economy will stabilize in the third quarter and then end the year with strong growth.
Securities have their own way of recovering
Both investors and financial institutions had high risk appetite during the stock market recovery period, the momentum of the US stock market set the longest record before stopping in the month. 3 past.
The recession is quite difficult when M&A deal value drops by 50% globally and 19% in North America. Keeping the financial markets stable is the central goal of the Fed and the success of this can help the recovery of the market more quickly.
According to the CEO of Patriarch Foundation, a Los Angeles-based digital holding company, the digital industry and perhaps the economy are in a difficult situation. difficult due to the large increase in debt, difficult to handle in the near future.
Although debt created a financial crisis in 2008, debt does not seem to be a problem in the period of economic expansion.
However, at the present time, corporate bonds and personal debt are still showing signs of increasing, while the ability to pay debt from the borrower's income was at an all-time low last year. This is even more difficult under the influence of COVID-19.
Currently, worries are starting to arise due to the risk of default and bankruptcy when companies face too much leverage and revenue and personal income are showing signs of declining when the economy. enter the narrowing phase.
Meanwhile, the debt of the US Government is piling up with a rapid increase due to the trillions of dollars needed to rescue businesses and people. US public debt has increased by 319 billion USD in just 6 days, bringing the total debt up to 23,800 billion USD.
Goldman Sachs estimates that the US budget deficit will be US $ 3,600 billion this year and US $ 2,400 billion by 2021, which will be equal to 17.7% and 11.2% of GDP in the two years.
Jeff Klingelhofer, co-director of investment at Thornburg Investment Management, said the recovery of the US economy could lose momentum if debt returns to become a long-term problem with the economy.
The US economy will not return to 100% when Covid-19 is resolved. Above all, business decisions will have to be considered in advance of the impact of translation and as well as it may come back again.
All business activities will have to be decided on the condition that everything is uncertain, as well as potentially withdrawing from the industry. What businesses have not anticipated for many years.
However, looking at the stock market will see a better outlook.
Wall Street still has a way to compensate for all the losses in March. The explosive trading session on Monday (April 6) of Wall Street showed that investors expected economic stimulus packages, along with the early control of the Covid-19 epidemic will help the US economy to regain its growth soon after a period of interruption in most economic activities due to the Covid-19 effect.
"I am a little skeptical of the V - shaped recovery. Everyone cannot suddenly return to work in May. Instead, a slower process is needed to restart the economy. However, the current stock market is still a bit optimistic about the prospect of recovery ". investment expert at Ally Invest said.